Showing all posts written by Tom Cowan

On July 29, 2022, the United States Patent and Trademark Office (USPTO) issued a Notice by Director Kathy Vidal that may be relevant to those seeking or holding patents on medical devices that require Food and Drug Administration (FDA) approval.  The Notice relates to certain duties owed to the USPTO with regard to statements and documents submitted to the FDA and other government agencies. The duties include a duty to disclose certain information and a duty of reasonable inquiry.

The Notice states “[t]he duty of candor and good faith in dealing with the USPTO includes the duty to disclose to the USPTO information material to the patentability of a claimed invention.” Further, “[e]ach party submitting a paper to the USPTO has an additional duty to perform an inquiry that is reasonable under the circumstances, including reviewing documents to identify information that is material to the patentability of a claimed invention.”  The Notice states it “is intended to clarify the duties, including as to materials or statements material to patentability or statements made to the USPTO that are inconsistent with statements submitted to the FDA and other governmental agencies.”

The Notice was issued against the backdrop of an Executive Order by President Biden regarding competition in the economy, specifically in the pharmaceutical industry.  Additionally, U.S. Senators sent a letter to the USPTO requesting “that the Office ‘take steps to reduce patent applicants’ making inappropriate conflicting statements in submissions to the [USPTO] and other federal agencies.'”  Regarding the letter, the Notice further states:

The letter provided a specific example in which “inconsistent statements submitted to the Food and Drug Administration (FDA) to secure approval of a product—asserting that the product is the same as a prior product that is already on the market— can then be directly contradicted by statements made to the [USPTO] to secure a patent on the product.” The Letter noted that such inconsistent statements “should be cause for rejecting the application and, when made knowingly and with bad intent, potentially other sanctions.”

Against this background, the Notice states it “is part of the USPTO’s efforts to put into effect the Administration’s goals and address the Senators’ concerns.”

The Notice thus discusses which parties have a duty to disclose information to the USPTO in various patent examinations and proceedings, and what material information must be disclosed.  For example, the duty to disclose “applies to positions taken by applicants or parties involving the claimed subject matter. For instance, in PTAB proceedings, parties should not take a position about the patentability of challenged claims that is inconsistent with positions taken in submissions to other Government agencies regarding the same subject matter.”  An example PTAB proceeding is cited which resulted in “suspending a practitioner for four years for failure to correct the written record after learning of inaccuracies in a declaration the practitioner had filed.” The Notice discusses similar duties in the context of patent examination and prosecution.

In addition to the duty to disclose, the Notice discusses the duty of reasonable inquiry and when these two duties arise in dealings with other government agencies besides the USPTO. 

The U.S. Patent and Trademark Office (USPTO) allows a patent applicant to pay reduced fees if it qualifies as a “small entity.”  Many types of filing fees are reduced by 50%.  These savings can be important for companies on a tight budget, and can add up where applicants have multiple filings.  For example, the savings on filing fees per non-provisional patent application are currently more than 900 USD, and the current savings on the 11.5 year maintenance fee for an issued patent are a whopping 3,850 USD!

Many startups can qualify as a small entity and reap the savings.  However, in some situations, even a tiny startup may need to pay the large, undiscounted entity fees.  It is important to make sure you truly qualify as a small entity, because in some situations, incorrectly filing as a “small entity” can be seen as a “fraud” on the USPTO, which can result in your patent being declared “unenforceable.”

A “small entity” for purposes of paying reduced USPTO fees is defined in 37 CFR 1.27(a)  as a person, a small business concern, or a nonprofit organization.  The USPTO Director has the authority to establish regulations defining independent inventors and nonprofit organizations. The U.S. Small Business Administration (SBA), a United States government agency, was given authority to establish the definition of a small business concern.

For small business concerns, most U.S. patent practitioners are familiar with the basic “small entity” requirements: i) have no more than 500 employees, and ii) not be obligated to assign the patent application to an entity that is not a small entity.  However, startups and other small companies should be aware that the first requirement actually states the following: “A concern eligible for reduced patent fees is one: (a) Whose number of employees, including affiliates, does not exceed 500 persons.” (emphasis added).

So, what is an “affiliate”?  Is an investor an affiliate?  What if that investor is a large strategic medical device company?  The answer is important, but may not be straightforward.

The SBA regulations state that two entities may be “affiliates” where one has the “power to control” the other.  The regulation states, in part, “[i]t does not matter whether control is exercised, so long as the power to control exists.”  The control may be “affirmative or negative,” or “indirect.”  Further, the SBA will “consider the totality of the circumstances,” including various factors “such as ownership, management, previous relationships with or ties to another concern, and contractual relationships.”

This is just an overview – various other issues are considered as well, and various other scenarios may also land you in large entity territory.  For example, the SBA may find “affiliation” based on stock ownership, where a “person owns or controls, or has the power to control, 50% or more of the concern’s voting stock.”  Further,  such a situation “is a non-rebuttable basis for finding affiliation.” (emphasis added).  There are other scenarios as well.

Determination of “entity size” is an individualized issue, dependent on various factors. 

The U.S. Patent and Trademark Office (USPTO) allows for a trademark application to be filed on an “Intent to Use” basis to establish a priority date before the mark is actually “used in commerce.” However, such use in commerce must happen before the trademark application will register with the USPTO. If your company markets medical devices or related goods that require regulatory approval, the use in commerce requirement presents unique issues.

Typically, use in commerce is established when the goods affiliated with the trademark application are shipped between two states or to a foreign country, and with a label or packaging showing the trademark on the goods. For most industries, use of a trademark “in preparation” of sales will not suffice to satisfy the use in commerce requirement. Additionally, a trademark owner is only given three years to use the mark in commerce and provide evidence of such use after the USPTO determines the application is otherwise ready for registration. If the owner does not submit proof that it has used the mark by the deadline, the application is deemed abandoned. Three years seems like ample time for many trademark owners, but anyone who has needed regulatory approval for a product knows the process can stretch well beyond these three years. How does one deal with this conundrum?

You may think that you should wait to file your trademark application so that you don’t run out the three-year clock. But this may allow competitors to swoop in and file intervening trademark applications. If the USPTO believes your mark is confusingly similar to the mark in a competitors’ prior application or registration, it could prevent you from being able to register your mark.

With few exceptions, the best strategy is to file your trademark application as soon as possible. Fortunately, the law provides an accommodation for trademark registrants with goods and services that require regulatory approval. Legislators recognized the fact that “commerce” varies in different industries. For instance, while some companies can sell products as soon as they are ready for market, others must undergo testing to get a stamp of approval prior to marketing or selling their products. This latter group typically includes medical device companies. These and other devices may require pre-market approval (PMA) or a 510(k) clearance from the U.S. Food and Drug Administration (FDA), which can take many years.

Lawmakers revised the definition of “use in commerce” to state that such requirement:

be interpreted to mean commercial use which is typical in a particular industry. Additionally, the definition should be interpreted with flexibility so as to encompass various genuine, but less traditional, trademark uses, such as those made in test markets, infrequent sales of large or expensive items, or ongoing shipments of a new drug to clinical investigators by a company awaiting FDA approval (Senate Judiciary Committee Report on S. 1883, S. Rep. No. 100-515, p. 44-45 (Sept. 15, 1988))

This expanded meaning of “use in commerce” has been generally adopted by the USPTO and the courts.

Global medical device company Boston Scientific has announced on December 27, 2018, that it exercised its option to acquire remaining shares of privately-held medical device company Millipede, Inc. upon its recent successful completion of a first-in-human clinical study.  Boston Scientific previously announced on January 24, 2018, an agreement to make a $90 million investment in Millipede.  The current press release states the prior agreement included an option for Boston Scientific to “acquire [Millipede’s] remaining shares for $325M at closing, with a $125M payment becoming available upon achievement of a commercial milestone.”

Millipede has developed a non-invasive solution for repair of the heart’s mitral valve.  According to Millipede’s website, Millipede’s IRIS Transcatheter Annuloplasty Ring System reshapes the mitral valve annulus of the heart to treat severe mitral regurgitation (MR).  MR is caused by a leaking mitral valve, which causes blood to flow backward from the left ventricle into the left atrium.  Over time, MR can lead to or accelerate heart failure and rhythm problems.  Millipede’s website describes the IRIS system as providing the gold standard in surgical heart valve repair – a complete annuloplasty ring implant.  The implant reshapes and reduces the mitral valve annulus opening, enabling return of leaflet coaptation and reduction of MR.

According to Millipede, the implant is delivered via catheter, for example through a small cut in the patient’s leg.  This allows patients to avoid invasive open heart surgery, which is necessary for implantation of conventional annuloplasty rings.  Millipede describes the transcatheter ring as repositionable and retrievable.

“We are very satisfied with the early results of our clinical program and are excited to see this technology further leveraged by Boston Scientific to expand the mitral repair solutions for patients around the world.” – Randy Lashinski, CEO, Millipede Inc.

Millipede is based in Santa Rosa, California and was founded in 2012 by majority investor Santé Ventures and Steve Bolling, MD, and has been led by CEO Randy Lashinski since 2014. 

Boston Scientific describes itself as a worldwide developer, manufacturer and marketer of medical devices, providing a broad range of high performance solutions that address patient needs and aim to reduce the cost of healthcare.

Millipede is a client of intellectual property and technology law firm Knobbe Martens.  With close to 275 lawyers and scientists nationwide, Knobbe Martens dedicates its practice to all aspects of intellectual property law including litigation and is consistently ranked among the top intellectual property firms worldwide.

The medical device and related markets have shown some growth recently.  For example, IHI, an iShares U.S. Medical Devices ETF, has a total return of about 24% year-to-date in 2018.   In the same time period, the S&P 500 has a return of about 8%.  The IHI fund has an average annual return in the last ten years of about 14% compared to about 10.7% for the S&P 500.  According to MarketWatch, the IHI fund invests in “medical-products companies that deliver the tubes, pumps and tools that are necessary to make medical facilities function. . . .  While some of the products offered by these companies are indeed high-tech, such as artificial heart valves, many are less glamorous, such as catheters and blood-pressure cuffs. But despite their flash, these items are staples, and medical offices and hospitals nationwide remain big revenue sources for these companies.”

MarketWatch further reports that ETFs related to healthcare in general have “more than tripled the returns of the S&P 500 this year.”  For example, the largest healthcare ETF by funds, XLV, is reportedly up 10% this year, and the IBB fund is up about 330% over the last ten years. Other healthcare-related funds reported to be outperforming the S&P 500 year-to-date in 2018 include the following:

• Janus Henderson Obesity ETF “SLIM,” up 20%;
• iShares U.S. Healthcare Providers ETF “IHF,” up 22%,
• Invesco DWA Healthcare Momentum ETF “PTH,” up 23%;
• the Ark Genomic Revolution Multi-Sector ETF “ARKG,” up 23%;
• the SPDR S&P Health Care Equipment ETF “XHE,” up 27%; and
• the Invesco S&P SmallCap Health Care ETF “PSCH,” up 40%.

There has been some activity and forecasts in the medical device market recently reported.  Some forecasts include the market for medical device connectivity projected to reach about $2.6 billion by the year 2023.  The global market for “IoT” (internet of things) medical devices is projected to grow at a compound annualized growth rate (CAGR) of about 25% from 2018 to 2023.   For the same period, the market for anesthesia-related devices is expected to have a CAGR of about 6.4%.  The global market for retinal surgery devices is reported as “likely to exceed $3 Billion by 2025, almost double from its current level in 2017.”  The global market for brachytherapy devices is reportedly predicted to rise at 4.2% CAGR from 2017 to 2022.

Some examples of recent medtech funding and M&A activity have included: CytoSorbents, a critical-care immunotherapy company that specializes in blood purification, received a research award of up to $3 million from the NIH.  Irvine-based Endologix, provider of solutions for aortic disorders, reportedly recently took out a $210.5 million convertible loan facility.  Urotronic, developer of a drug-coated balloon catheter for treating urethral strictures in men, reportedly raised $20 million in an equity offering involving 7 investors.  410 Medical Inc. a Durham, North Carolina-based company focused on technologies for resuscitation of critically ill patients, reportedly recently raised $3.1 million in financing.

Global medical device company Boston Scientific has announced on January 24, 2018, an agreement to make a $90 million investment in privately-held medical device company Millipede, Inc.  Millipede has developed a non-invasive solution for repair of the heart’s mitral valve.  According to the press release, the agreement includes an option for Boston Scientific to acquire all remaining shares of Millipede, upon completion of a clinical study, for an additional $325 million in cash, with an extra $125 million in payments upon completing a commercial milestone.

According to Millipede’s website, Millipede’s IRIS Transcatheter Annuloplasty Ring System reshapes the mitral valve annulus of the heart to treat severe mitral regurgitation (MR).  MR is caused by a leaking mitral valve, which causes blood to flow backward from the left ventricle into the left atrium.  Over time, MR can lead to or accelerate heart failure and rhythm problems.  Millipede’s website describes the IRIS system as providing the gold standard in surgical heart valve repair – a complete annuloplasty ring implant.  The implant reshapes and reduces the mitral valve annulus opening, enabling return of leaflet coaptation and reduction of MR.

According to Millipede, the implant is delivered via catheter, for example through a small cut in the patient’s leg.  This allows patients to avoid invasive open heart surgery, which is necessary for implantation of conventional annuloplasty rings.  Millipede describes the transcatheter ring as repositionable and retrievable.

“We saw an opportunity to bring the gold-standard surgical approach to repairing the mitral valve to an underserved population of severe MR patients with transcatheter techniques, and are excited Boston Scientific also sees the unique abilities of the IRIS transcatheter ring” – Joe Cunningham, MD, Chairman of the Board, Millipede, Inc. and Managing Director of Santé Ventures.

Millipede is based in Santa Rosa, California and was founded in 2012 by majority investor Santé Ventures and Steve Bolling, MD, and has been led by CEO Randy Lashinski since 2014.

Boston Scientific describes itself as a worldwide developer, manufacturer and marketer of medical devices, providing a broad range of high performance solutions that address patient needs and aim to reduce the cost of healthcare.

Millipede is a client of intellectual property and technology law firm Knobbe Martens.  With over 275 lawyers and scientists nationwide, Knobbe Martens dedicates its practice to all aspects of intellectual property law including litigation and is consistently ranked among the top intellectual property firms worldwide.

The U.S. Food & Drug Administration (FDA) issued a proposed guidance on August 8, 2016, regarding software changes to medical devices.  The proposed guidance relates to requirements for submitting medical device software changes to the FDA for approval.  The final document will provide assistance to medical device companies and the FDA for determining when changes to software or firmware for a medical device require FDA clearance.  The medical devices covered include 510(k)-cleared devices and preamendments devices subject to 510(k).

The FDA’s proposed guidance explains that premarket notifications are generally submitted for commercially-distributed medical devices undergoing significant changes in design.  Such changes include modifications that “could significantly affect the safety or effectiveness of the device” or a “major change or modification in the intended use of the device.”  The proposed guidance relates to software changes and is an update to the original guidance issued in 1997 regarding changes to existing devices.

The “software” subject to the proposed guidance is defined as “electronic instructions used to control the actions or output of a medical device, to provide input to or output from a medical device, or to provide the actions of a medical device.”  This includes software embedded in a device, software that is an accessory to another device, and “software that is intended to be used for one or more medical purposes that performs these purposes without being part of a hardware medical device.”

The FDA provides a flow chart for assisting with the determination, see below.  Issues addressed in the determination include changes related to: strengthening cyber security; meeting specifications of the most recently cleared device; introducing or affecting hazardous situations; creating new risk control measures; and affecting clinical functionality or intended use of the device.  Additional factors to consider beyond those in the flow chart and some examples of modifications are provided in the draft guidance as well.

The proposed guidance notes that in some cases a new 510(k) is not necessary, and that existing Quality System (QS) requirements may suffice.  Such QS requirements mandate, among other things, that the manufacturer maintains records, for production upon request, regarding such changes and the processes used to determine the changed device meet the design specifications.  Further, the proposed guidance does not apply to software for which the FDA has previously said it will not enforce compliance, including some mobile apps used with medical devices.

Some observers think the proposed guidance will help with improving cybersecurity of connected medical devices.  The public may provide comments to the FDA on the proposed guidance until November 7, 2016: comments may be submitted electronically here.

According to a press release from the Israeli company BioLineRx, their novel polymer for treating Celiac Disease has been confirmed as a Class IIb medical device in the European Union (EU).  According to the company, the polymer, called BL-7010, is “a novel, non-absorbable, orally available co-polymer intended for the treatment of celiac disease. It has a high affinity for gliadins, the immunogenic proteins present in gluten that cause celiac disease. By sequestering gliadins, BL-7010 effectively masks them from enzymatic degradation and prevents the formation of immunogenic peptides that trigger the immune system. This significantly reduces the immune response triggered by gluten.”  The company is also investigating use of the polymer as a food supplement to target patients with non-celiac gluten sensitivity.

According to BioLineRx, the celiac co-polymer BL-7010, was invented by Prof. Jean-Christophe Leroux from the Department of Chemistry and Applied Biosciences, Institute of Pharmaceutical Sciences, ETH Zurich, Switzerland, and is being developed by BioLineRx under a worldwide exclusive license agreement with Univalor.

According to their website, BioLineRx is a “clinical-stage biopharmaceutical company dedicated to identifying, in-licensing and developing promising therapeutic candidates. The Company in-licenses novel compounds primarily from academic institutions and biotech companies based in Israel, develops them through pre-clinical and/or clinical stages, and then partners with pharmaceutical companies for advanced clinical development and/or commercialization.”

It is common for medical device makers to partner with doctors, universities, designers, manufacturers, R&D labs, or salespeople in the development of medical devices.  To reap the intended benefits of such efforts, collaborators should consider at least three aspects of intellectual property (IP) law: disclosure, inventorship, and ownership.

Disclosure – Identify Each Party’s Pre-Collaboration IP 

It is important to identify the know-how of each party before collaboration begins.  This pre-collaboration IP can be identified in a collaborative agreement or contract, which may be a Joint Development, Consulting, License, or Manufacturing Agreement.  How pre-collaborative IP is identified depends on the nature of the know-how.  For example, medical devices may be identified with engineering drawings, whereas software could be identified using functional descriptions, flowcharts, or code.

One approach for identifying pre-collaborative IP is using patents and patent applications. A utility patent application should clearly identify the subject matter possessed, and a pre-collaboration filing date of the application can help prove prior possession.

Inventorship – Identify Each Party’s Contribution to the Developed IP 

To be an inventor under U.S. patent law, conception of the invention is key.  The inventor must contribute a “definite and permanent idea of the complete and operative invention” such that one of ordinary skill in the field could practice the invention.  Thus, a technician or manufacturer merely reducing an idea to practice is generally not an “inventor.”

Combining ideas from multiple people results in “joint inventorship.”  To qualify as a joint inventor, a person need not have contributed to every “claim” at the end of a patent.  Rather, contribution to one claim is all that is required.  Even when partnering with seemingly non-inventive collaborators, joint inventorship may still occur.  For instance, if a manufacturer or technician alters an idea to make it work, he or she may be an inventor.  However, such alterations must help distinguish the invention from the existing state of the art (i.e., more than just an existing idea or an obvious modification).  The analysis is contextual. For instance, conceiving of screws to fasten parts together does not typically help make an idea patentable. But, in the context of regenerative scaffolds secured to tissue or bone, the use of a screw may qualify as an inventive contribution.

Ownership – Identify Each Party’s Ownership of the Developed IP

In the U.S., inventors are the default owners of their patentable inventions. However, employers typically require employees to assign ownership to the employer.  In collaborations, assignment to another party across the table may be required. Therefore, collaborators should be alert for conflicting agreements, such as where an inventor has assigned one invention to multiple parties.

Further, inventions can be assigned before they are conceived. In collaborations, this can be good, for example, to proactively address allocation of ownership. But it can also cause problems, for example, where the scope of the assignment is not appreciated.  Ownership of expected innovations may be straightforward, but ownership of unexpected spinoffs may be less obvious.  Where capturing ownership is desired, assignment clauses should be broadly drafted.

The Medical Device Manufacturers Association (“MDMA”) has been vocal in lobbying Capitol Hill for what they consider “necessary changes” to patent law for continuing medical device innovation.  Part of that lobbying has included opposition to recently proposed patent reform legislation, the so-called Innovation Act., or H.R. 9.

As reported by other publications including Medical Device and Diagnostic Industry (MD+DI), the trade group has now taken to writing a letter to the lead legislators of the Innovation Act, expressing the group’s concerns with the proposed law. The letter was sent by the president and chief executive officer of MDMA, Mark Leahey, on April 14, 2015, to legislators Bob Goodlatte (R–VA), chairman of the House Committee on the Judiciary and introducer of the legislation, and John Conyers (D–MI), ranking member of the Committee.

MDMA sees the law as weakening intellectual property rights and creating a potential “chilling effect” on medical device innovation.  “It takes years, sometimes a decade or more, and tens of millions of dollars to secure regulatory approval and reimbursement for new medical devices,” the letter states. “Because the industry is so highly regulated, investment in early-stage medical device companies is a very risky proposition.”

The letter further states that “[t]he patent is the lifeblood of the medical technology industry and serves as the bedrock on which risk-taking entrepreneurs are able to create new markets and new jobs, and most importantly, deliver break-through technologies to patients who need them.”

According to articles, the Innovation Act was drafted largely in response to a perceived “patent troll” problem, or those who own and assert patents against others –  including against medical device companies – but who don’t practice the patented invention themselves.  Some of these “non-practicing entities” have been accused of making frivolous legal threats against small businesses, or gaming the system for quick six-figure settlements from large corporations with deep pockets.   Mr. Leahey contends in the letter that “the provisions in H.R. 9 that purport to target only abusive patent practices are so broadly drafted that they would make the defense of legitimate intellectual property from infringement more costly and burdensome, and discriminate against innovation models such as those who develop technologies and license them to larger players for distribution purposes.”

The letter generally alleges five areas of concern: 1) unfair fee shifting; 2) broadly-drafted customer stay provisions; 3) increased pleading requirements and potentially burdensome discovery limits; 4) providing patent challengers too many bites at the apple; and 5) no provisions preventing diversion of Patent Office fees to other government entities.

As an example, on the fee shifting issue, MDMA argues that the “loser pays” provision of the Innovation Act would severely harm solo inventors and start-ups. “Faced with the prospect of having to cover the legal expenses of large companies, start-up companies with limited capital either will not bring otherwise meritorious cases against infringers of their patents or will be forced into early settlements when defending against alleged infringement,” Leahey wrote. MDMA does acknowledge that such “fee shifting” should be done if “a party acted in bad faith or was unreasonable.”